Mubasher Trade main­tains “sell” on CIB, sets tar­get price at EGP 76 per share

The re­search firm be­lieves that the net fees and com­mis­sions’ in­come should im­prove fur­ther in the com­ing pe­riod

The Daily News Egypt - - Business -

Mubasher Trade Re­search has main­tained their “Sell/Mod­er­ate Risk” rat­ing for the stock of the Com­mer­cial In­ter­na­tional Bank - Egypt (CIB), set­ting the price tar­get (PT) at EGP 76 per share,ac­cord­ing to a re­cent re­port.

The re­search firm be­lieves that the CIB’s net fees and com­mis­sions’ in­come, which lev­eled up 56% year-onyear, “should im­prove fur­ther in the com­ing pe­riod, as the EGP flota­tion should re­flect pos­i­tively on cus­tomers’ abil­ity to open let­ters of credit for im­ports.”

To­tal bank­ing in­come surged 43.4% year-on-year to EGP 4.187m, the re­port men­tioned.

Net in­ter­est mar­gin (NIM) fell 5.47% year-on-year in Q3 2017 from 5.75% in Q3 2016.

The CIB’s stock “has fallen by 13% from its peak in mid-July” and “is cur­rently traded at 3.3x book value, in­clud­ing in­terim earn­ings,” Mubahser Trade added.

The CIB’s re­turn on eq­uity (ROE) stood at 31.4% year-on-year for the first nine months of 2017, the re­port in­di­cated.

The CIB onThurs­day posted a 22% year-on-year in­crease in con­sol­i­dated prof­its for Q3 of 2017.

Net prof­its amounted to EGP 2.087m in Q3 2017, ver­sus EGP 1.703m in Q3 2016, beat­ing Mubasher Trade ex­pec­ta­tions of EGP 1.976m.

Net in­ter­est in­come (NII) and non-in­ter­est in­come went up 40.9% year-on-year at EGP 3.567m and 60% year-on-year at EGP 620m, re­spec­tively, push­ing the CIB’s an­nual earn­ings higher.

More­over,loan loss pro­vi­sion (LLP) charge soared 744.6% year-on-year at EGP 623m.

To­tal cost rose 25.6% year-on-year at EGP 794m due to a 29% year-onyear in­crease in gen­eral and ad­min­is­tra­tive ex­penses,as well as an in­crease of a 33% year-on-year in de­pre­ci­a­tion.

Mean­while, the cost-to-in­come ra­tio dropped 19% in Q3 2017 from 22% in Q3 2016.

Mubasher Trade noted that CIB’s to­tal cor­po­rate loans de­clined by 4.4% quar­ter-on-quar­ter to EGP 82.9bn due to the current high-in­ter­est rates, which led to a slow­down in de­mand for credit.

On the other hand, CIB’s to­tal re­tail loans increased by 6.3% quar­ter-on­quar­ter, the re­port high­lighted.

The re­search firm is fore­cast­ing loan growth to go up due to the expected in­crease in cap­i­tal ex­pen­di­ture dur­ing 2018, point­ing out that the CIB’s net loans grew 44.8% year-onyear to EGP 88bn at the end of Septem­ber 2017, while cus­tomer de­posits ac­cel­er­ated by 39.1% year-on-year to EGP 247.7bn.

The bank’s net loans-to-de­posits (L/D) ra­tio increased slightly on an an­nual ba­sis from 34.1% in Septem­ber 2016.

The bank’s loans as­set qual­ity slipped slightly to 6.9% from 5.3% in Septem­ber 2016, while non-per­form­ing loan (NPL) cov­er­age ra­tio plunged 155% from 158% in Septem­ber 2016.

How­ever, cap­i­tal ad­e­quacy ra­tio (CAR) rose 16.95% in Septem­ber 2017 from 13.9% in Septem­ber 2016, “which is com­fort­ably above min­i­mum CAR re­quired by the CBE of 11.25%,” the re­port said.

In Oc­to­ber 2017, the Cen­tral Bank of Egypt (CBE) lifted the re­serve re­quire­ment ra­tio on de­posits from 10% to 14% as an al­ter­na­tive for rais­ing in­ter­est rates to dis­in­flate the Egyp­tian econ­omy.

Mubasher Trade in­di­cated that the CBE’s de­ci­sion would have a short­term neg­a­tive im­pact on local banks which are expected to keep their de­posit rates down­ward, not­ing that the CIB would main­tain orig­i­nat­ing loans to the small- and medium-sized en­ter­prises (SME) to ad­dress the higher RRR.

“Banks that fi­nance SMEs within the frame­work of the CBE’s ini­tia­tive are ex­empted from com­pul­sory RRR with an amount equiv­a­lent to such loans,” the re­search com­pany noted.

“The CIB has already started to take steps in this di­rec­tion, with the bank cur­rently con­sid­er­ing en­ter­ing the real es­tate mort­gage sec­tor through a new sub­sidiary—a plan pend­ing ap­proval by the bank’s board of di­rec­tors,” the com­pany con­tin­ued.

“The bank is fo­cus­ing this year on mort­gage fi­nanc­ing for lower-in­come cit­i­zens and may expand its fi­nanc­ing at the be­gin­ning of next year to in­clude mid­dle-in­come earn­ers,” the re­port added.

The re­port men­tioned that the CBE pro­motes mort­gages for lowand mid­dle-in­come earn­ers to bring to­tal fi­nanc­ing ex­tended un­der its ini­tia­tive to EGP 10bn.

“The CIB is also look­ing to grow its re­tail bank­ing port­fo­lio, which has solid po­ten­tial for growth de­spite high-in­ter­est rates and the CBE’s cap on monthly pay­ments on loans at 35% of the bor­rower’s to­tal doc­u­mented in­come,” the re­port con­cluded.

Mean­while,the re­search firm main­tained the “Buy/Low Risk” rat­ing for Ara­bian Cement Com­pany, with a price tar­get (PT) of EGP 11.13 per share, im­ply­ing an expected to­tal re­turn of 35%, ac­cord­ing to a re­port is­sued Mon­day.

Ara­bian Cement re­ported a hike in prof­its for the third quar­ter of 2017 by 561% year-on-year, due to higher sales.

Prof­its hit EGP 95.9m in Q3 2016, up from EGP 14.5m in Q3 2016, as sales increased to EGP 674.5m from EGP 531.4m.

The CIB’s re­turn on eq­uity (ROE) stood at 31.4% year-on-year for the first nine months

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